June 18, 2007

David Lat has an op-ed in today's NYT, about the giant bonuses law firms are giving to Supreme Court clerks: $250,000, on top of a salary of nearly $200,000.

In recent years, the practice of law at the nation’s largest firms has become much more of a business and much less of a profession. Firms have been squeezing more billable hours out of their associates, abandoning less lucrative practice areas and showing the door to partners who don’t bring in enough business — measures that would have been unheard of in the profession’s more genteel days.

So this bizarre competition among prestige-hungry law firms to collect the most young legal rock stars actually represents a healthy check, however modest, on this profit-maximizing behavior. By harnessing irrational law firm egotism to serve the rest of the profession, enormous clerkship bonuses achieve an impressive, increasingly difficult feat: getting top law firms to contribute to something other than their own bottom line.

You can make up all kinds of theories about why some ridiculous behavior is actually for the good. I'll have to think about this one some more. It may seem hard to care if law firms compete with each other self-destructively, but try.

38 comments:

As an in-house Attorney who pays a lot of fees to big law firms, I can say that there are many big firms who constantly try to bill the crap out of you after offering nothing in terms of inellectual capacity.... Translation, they give your work to new associates who know nothing but how to put in tons of hours. You have to weave your way through these firms to find the few attorneys who have an original thought. If this is the case, there is a wide open opportunity for the rise of smaller firms, who can give more quality at a much lower cost.

While I'm sure there are happy attorneys somewhere, I cannot say I know many, as most of the attorneys I know don't actually practice law anymore. I'm sure this "trend" (yeah, as if law firms only became rapacious, profiteering businesses in the last few years - it must be George Bush's fault...) is a contributing factor.

Why don't the big firms get together like the major professional sports leagues and institute a "draft" of the top upcoming legal talent? That way they can put a cap on salaries just like the National Football League, for example. This model would require the establishment of a union of young lawyers and some sort of collective bargaining agreement, but if it works for professional sports, then maybe it should be considered for the legal profession.

I don't get Lat's argument. Bonuses for Supreme Court clerks is perfectly rational and profit-maximizing. These are the same firms with $1-2M in revenue per partner. This is chump change, and well worth it not only for the bragging rights and political connections, but for building a Supreme Court practice.

I would have more respect for the argument that law clerks or lawyers in general are overpaid if law schools didn't charge so much. The estimated cost of my law school is $64,000 a year (which like most estimates underestimates living expenses). So $200,000 of debt and the opportunity cost of making at least a nice five figure salary, sort of makes up for being "overpaid".

When will Ann take issue at what her law school and other law schools are charging students? Law Schools are terribly mismanaged and students are forced to subsidize the professor's scholarship (even esoteric stuff that is not particularly helpful to the practice of law) as well as subsidize their fellow students practicing so-called public interest law, which in affect in cases subsidizes left-of-center advocacy.

When Ann is willing to take issue with this, than maybe we can focus on law firm salaries and bonuses.

Law firms end up in effect subsidizing less wealthy precincts of the profession.

For how many people? Eighteen per year? It just does not stand the scrutiny of anything more than a surface scan. They are paying for perceived access, even if they cannot practice before the Court they can surely call their old mentor and of course they can render advice to others that maybe about to go before the court.

One of the things we lawyers do is make up these transparent rules that fool nobody and then call it "ethical."

There is not an altruistic bone in the body of the hiring and compensation committee that chooses to give those bonuses. There is a quid pro quo. These firms believe those associates are worth that sort of cash because it is going to remunerate the firm. To think the firms want you to pay off your debt quickly so you can go onto academia is the height of sophistry or naivety. I just don't know which one.

well i've learned 2 things. 1. sloan says he is an attorney. that answers a lot of questions. 2. it there is that much $ in the piggybank for hiring bonuses the firms are overcharging out the wazoo.

last, how about a disclaimer...something that says "if you retain this firm, please be advised that we routinely piss away a quarter million to get some hotshot clerk...we are gonna work his butt off and charge you double for his brain, then when get gets to be merely adequate in real world experience he will leave and we will spend some more so we can bill the shit our of our clients...use his service or not".

Mr. Lat could have written "...harnessing ethical law firm egoism to serve the rest of the profession..." or "...harnessing rational law firm egoism to serve the rest of the profession..."

Or, he could have simply pointed to the ridiculous paradox of harnessed law firm egotism in service to others.

Civilization's winning strategy has always been a balance of healthy self-interest (egoism) with selfless regard for the interests of others (altruism).

Although egotism - the exaggerated belief in one's own importance and regard of oneself with undue favor - can have a sociopathic logic to it, in a truly civilized society egotism can never be rational.

I think that it is 27, not 18 per year. But also note that invariably these SC clerks clerked for a lower level, usually Circuit Court, judge the year before.

A couple of years ago, I saw a breakdown of what schools the SC clerks had attended. It was almost like there were quotas for Harvard, Yale, etc.

In any case, these clerks have to be compared to the associates that they are competing against directly, and they likely would have earned almost that much more than the SC clerks for those two years, so this can be seen as an incentive for that group to take clerkships.

Finally, it is about the advertising. The law firms involved likely figure that each attorney who has a SC clerkship in his bio is worth at least the $250k in advertising. Also, you may be able to argue that two years clerking are as productive as two years as a green associate in teaching the practice of law.

Of course, I am like Sloanasaurus in never figuring out why I should hire a firm like that in the first place, when I worked as in-house counsel.

My wife is a big-firm attorney. We met in law school. She has observed that many of the best attorneys come from lesser law schools. They were the very best in their classes and they work their tails off. She wonders why the firm doesn't hire more of these people, instead of mostly hiring a bunch of people every year from the Top 25 or so law schools.

The answer is that businesspeople who can afford to pay $200 to $700 an hour for legal work definitely look at the rosters of the firms where they send their business. They want very much to see those rosters full of grads from the best schools, not from places like the University of Akron. Having somebody at your firm who went to Harvard is worth it just for appearance, even if their cost if outrageous, and even if that person isn't a very good attorney.

Also, law isn't that tough. Most of what you do is pay attention to detail and slog through stuff. Nothing that I do as a lawyer is too complex for a person of average intelligence and education who wants to do it themselves. It's just hard, boring work, and sometimes technical work, which is why people pay lawyers to do it.

Seven Machos point is not that one lawyer is not better than another, quite the contrary. His point is that people overrate the piece of paper that hangs above the desk.

I would suggest, without proving, that the person who graduates at the top of their class from Akron or Southern Illinois is a far more valuable asset to a firm in terms or actual quality of work produced than someone in the bottom of their class from a "top 10 law school." Nonetheless the person with the pedigreeded degree will receive wider consideration for employment regardless of their skills.

Sixty percent of the score on law school rankings comes from how widely known the which school is. My Law School, Southern Illinois, receives high marks because of its extensive library which is open to students 24/7/365. It also receives high marks for class size.

It is also a relatively new school, about 30 years old, so it is still building its reputation.

Your second point is correct, the firms perceive these signing bonuses make economic sense. That is not what Lat says though.

7 nachos point is insipid. when i hire an attorney i hire him by reputation/referral from others. i've done the big time DC KLM streeters and I got nice opinions that probably worked well at the appelate level but in the down and dirty of ny supreme court where the judge just decides and knows that the backlog on appeal is so great that he really doesn't give a shit, well you can stick your harvard degrees you know where. they mean zero compared to someone who can get things done.

Maybe the money would be better spent on grooming and hygiene amongst the legal secretaries. Some of the tackiest Trash I've ever seen masquerading as "Legal Secretaries" with their chipped nails, unwaxed bare legs, split ends....these Skanks currently roaming the corridors of big law firms.

How is a fledgling young attorney supposed to summon any enthusiasm for the work with a Secretary that looks like that?

Get these women some nylons, makeup and a curling iron....quick. That'll go a long way to solving what ails big firms these days.

The scandal is that there is such a thing as a Supreme Court law clerk. Why aren't people appalled by the influence these people have? Essentially, politically connected young lawyers who have never practiced law in their lives who are subject to no appointment or confirmation or anything beyond an informal hiring process are allowed to have more influence over the state of the law in this country than most life time tenured federal judges. It is a disgrace. Supreme Court justices have too important a job to have clerks. If they are too old to do the work themselves, they need to step down and let someone else have a shot. No one who has not been appointed by the President and confirmed by the Senate should be writing Supreme Court opinions. Yet, in our current system clerks in some cases do just that. It is appalling.

Under John's analysis it seems then that no elected or appointed official should have any assistance, which seems on its face to be patently absurd.

Rather than go through the process every year though it would seem that they would be better off hiring staff attorneys that are General Schedule employees who make this a career rather than a stepping stone to the big bucks at megafirm.

I agree with Badger 6. I don't think anybody on the Supreme Court is going to sign or sign on to an opinion without reading it pretty well first.

Incidentally, I still do the same thing in law. A partner asks me to write a document about X, Y, and Z, and that's what I do. People do this for CEOs in business, too. Entire presidential staffs do this. It's the way of the world.